Bhamashah: PSU insurer walks out due to breach of contract leading to huge frauds?

A near five-fold increase in claims since the current phase of Rajasthan’s Bhamashah insurance scheme amid allegations of large-scale fraud by hospitals, has resulted in PSU insurance firm The New India Assurance (NIA) Company walking out of the scheme.

Incurred claims ratio (ICR), or the ratio of claims to the premium received, were 90% in the first year of the scheme in 2015-16 and rose to 176% in 2016-17.

A near five-fold increase in claims since the current phase of Rajasthan’s Bhamashah insurance scheme started (see graphic), amid allegations of large-scale fraud by hospitals, has resulted in PSU insurance firm The New India Assurance (NIA) Company walking out of the scheme.

While officials of New India in Mumbai and Jaipur refused to comment, Naveen Jain who heads Rajasthan’s State Health Assurance Agency (SHAA) said, “This is illegal as they are violating the Insurance Act”. He added, “Overnight contract cannot be breached and we are taking measures ….”

Incurred claims ratio (ICR), or the ratio of claims to the premium received, were 90% in the first year of the scheme in 2015-16 and rose to 176% in 2016-17. Following this, New India raised the premium from Rs 370 per family to Rs 1,263. ICR rose from 40.5% in December 2017 to 118.8% in the first 12 days of September 2018.

New India’s letter of September 14, 2018 says SHAA has violated the contract by withholding Rs 106.74 crore of premium due to it — the premium was deducted as New India had not allowed claims of this amount.

In addition, the letter says, “Such instances included repeated short payment of quarterly premium, non-sharing of digital beneficiary data, non-implementation of biometric identifications of beneficiary claimants, non-implementation of live capturing of beneficiary photographs at the time of admissions/discharge etc”.

“Therefore, we are constrained to inform you that such deliberate short payment of due premiums is in contravention to agreed terms and clear violation of RFP,” NIA’s letter adds. “Hence the policy is discontinued with immediate effect and no future claims shall be admissible.”

This is not the first time SHAA has withheld premiums due and an August 23 letter from NIA also refers to this. That letter says, under the agreement, SHAA was to share beneficiary data with it in a digital format, but this was never done “other than total number of beneficiaries at some particular time”. And while the agreement was that Aadhaar-biometrics would be used to identify beneficiaries, it added that if this was not possible, live photographs of patients would be uploaded; this was, however, delayed.

Issues of fraud have dogged the scheme from the very beginning and NIA and SHAA have been at loggerheads over this. In June, NIA de-empanelled 66 hospitals it suspected of making fraudulent claims, but within a few hours of this, the state government overruled it. In a mail to NIA’s branch head in Jaipur, the joint CEO of the Rajasthan State Health Assurance Agency (RSHAA) said the de-empanelment was “completely unilateral, arbitrary, mala fide and in clear violation of the provisions of the … agreement” between NIA and the government.

While NIA believes it has the power to de-empanel hospitals for fraud under Clause 1.25.10 of the agreement, the Rajasthan government feels the “clauses related to de-empanelment can be invoked by none other than RSHAA”, to quote from the RSHAA mail cancelling the de-empanelment done by NIA in June. At that time, the Rajasthan government had said all claims would have to be met until it was satisfied there was a fraud — “all claims submitted by the hospitals shall be honored and shall NOT be rejected on this ground”.